Daily Price Action

EURAUD: False Break Last Week or Not?


It’s time to find out if last week’s close above 1.5227 on the EURAUD was indeed a false break. Or rather, a false break that will attract selling pressure and achieve follow through.

I wrote about the relationship between false breaks and pin bars on Friday. It’s a simple enough concept, but the implications are powerful and quite lucrative for those who exhibit the necessary patience.

As we’d expect, Thursday’s EURAUD close back below the 1.5227 level went on to form a bearish pin bar on the weekly time frame. Friday’s session found selling pressure just above 1.5227 and went on to lose nearly 100 pips before settling at 1.5110.

The one drawback to that weekly pin bar is the fact that it formed within a consolidation zone.

EURAUD weekly bearish pin bar at resistance

I’ve found that the best buy and sell signals occur at prominent swing points following extended moves higher or lower. The candlestick pattern above doesn’t fit that mold.

As you can see, the EURAUD hasn’t made much progress since June. The past five months have been spent ranging between 1.4440 support and 1.5227 resistance.

Still, as long as 1.5227 holds as resistance on a daily closing basis (5 pm EST), a reversal scenario shouldn’t be ruled out. That doesn’t mean I’m going to sell from this area, but I will keep a close eye on how price action reacts to it over the coming sessions.

An alternate approach would be to wait for a daily close below trend line support (see chart below). The level in question extends from the February low and has been tested on a couple of occasions already. A break below that would first target the September low near 1.4800.

I’m going to stand aside for now and just watch how price action reacts to 1.5230, which should once again serve as resistance. Keep in mind that Australia trade balance is out on Wednesday at 8:30 pm EST followed by retail sales on Thursday at the same time.

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EURAUD false break on the daily time frame

Leave a Comment:

Ryan Guderian says

I took a short with its high strung, highly caffeinated, little brother, the EURNZD. The pin bar on that pair was much more over extended and, as a bonus, the swap is great! Even though volatility is extreme on this crazy cross, a small position with very low or zero leverage can sit forever as far as I’m concerned. Collect that swap baby! I did put in a stop well above the pin bar and also above monthly highs but I use that only as an emergency. Monthly chart shows this pair could go to 1.45 within the next year IMHO.

    Justin Bennett says

    I’d agree with that. As long as 1.7060/80 holds as resistance on the EURNZD, there’s a high chance of a move lower.

Jeff says

The EUR/NZD pair also painted a bearish pin bar on the weekly chart, and at major weekly resistance at 1.72281. It has retraced from Tuesday’s low to the 50% retracement level on the daily chart. This looks like a selling opportunity. What do you think?

    Justin Bennett says

    Hi Jeff, I used that EURNZD pattern in Friday’s Q&A. See the link in the above post.

Mariat Mohammed says

Dailypriceaction is the best for me since I started following Ur analysis, my trading experience has improved. But please Sir Justin if you can create a telegram group for us, it will really help a lot. Thanks

Darius says

13 day. Will be second false brreak? Or this time real break?

Mimi says

I bought the pair at 1.480 in September already an added yet another position to the trade after the consolidation broke last week on the H4. EUR has been strong for most of this year

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